Companies Raising Prices Due to Tariff increase, Walmart Threatens to Follow Suit

Business February 21, 2019

The back and forth between China and the United States in the ongoing trade war is starting to sting the US-based companies, who are struggling to maintain profitability against the backdrop of increasing import tariffs.

Donald Trump kicked off the week by imposing an additional 10 per cent import tariffs on over $200 billion worth of Chinese goods. This time, U.S. president targeted a wide range of consumer goods that stirred an outcry from American companies. The White House justified the tariffs as critical for national security issues but the move was largely motivated for economic reasons. The new levies will make imported goods more expensive therefore the locally manufactured substitutes more appealing.

On Monday, Trump administration announced additional 10 per cent import tariffs on Chinese goods worth $200 billion

The new duties along with the previous ones will subject more than half of the imported Chinese goods to increase taxes. GlobalData Retail’s managing director, Neil Saunders says that the ongoing trade war is bad news for retailers, especially the latest round of tariffs that directly affects the prices of a variety of consumer goods. Companies will now have to decide whether they want to pass the tax burden onto the consumers or let their own profit margins take a hit.

Luckily, increase in average household income in the U.S. means that consumers can afford to spend a little more on goods, but if the prices rise across the board, the retail sector will likely see a decline in sales volume which will affect their profits in the long term.

Ever since the trade war began, companies like Coca-Cola and Winnebago have raised their prices while others are planning to follow suit. Here are some of the most popular American brands that have fought back against the tariffs by raise prices.

Walmart

Walmart recently sent a warning letter to the U.S. government that if the most recent tariffs on Chinese goods aren’t reversed, it will have no choice but to increase prices for the consumers. Walmart wrote that it was very concerned about the effect of these tariffs on its business, consumers, suppliers and the country’s economy as a whole.

Gap

Gap is another retail giant that has been affected by the recent tariff increase. The company’s CEO, Art Peck, recently told Bloomberg in an interview that it is frantically trying to move its manufacturing away from China. Peck said that 22 per cent of the company’s apparel is still manufactured in China, in which case, it will have no choice but to pass the tax burden to its consumers.

Coca-Cola

On July 27, Coca-Cola announced that it was planning to raise prices on all its sodas due to the tariff increase. CEO James Quincey said in an interview with the Wall Street Journal that the steel and aluminum tariffs imposed by President Donald Trump were one of the biggest causes behind the price push.

Winnebago

Michael Happe, the CEO of Winnebago Industries, said that the company has been making some aggressive price increases lately because, like many others, it too has been affected by the steel and aluminum tariffs. The company has also been forced to change its RV’s design to cut down on costs.

Polaris Industries

Polaris is an American company that makes motorcycles and snowmobiles. Its CEO, Scott Wine, said in a press conference recently that the company had to increase prices on its products after the steel and aluminum tariffs were announced. Wine warned that a collective price increase on consumer goods could have an impact on the economy and trigger inflation.

Previous import taxes on steel and aluminum have forced a number of companies, including Polaris Industries, Winnebago and Whirlpool to increase prices

Whirlpool washing machines

During a conference call with shareholders in July, Marc Bitzer, the CEO of Whirlpool, revealed that the steel and aluminum tariffs have increased raw material costs for the company, which has affected its profit outlook. The company is now increasing prices to cover the costs.

General Motors

GM wrote a letter to the US Commerce department in June, calling the government to abandon the tariffs on the auto industry which could increase prices by thousands of dollars on individual consumers. The letter said that even if the company passes down the tax burden to the consumers, it would impact the demand for new cars and lower profits indirectly.